Thursday, May 26, 2016

Northerners Hoarded U.S. Coins


Although the North had the manufacturing facilities and railroads to win the Civil War from 1861-1865, the population was worried about the outcome and engaged in heavy hoarding of coins.  All the silver coins vanished from circulation, and only the penny was used in commerce.  This story of mistrust in the national currency is not part of the popular history of that conflict, but it was an enormous concern to the public at the time.

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The Indian Head cent, also known as an Indian Head penny, was a one-cent coin ($0.01) produced by the United States Bureau of the Mint from 1859 to 1909. It was designed by James Barton Longacre, the Chief Engraver at the Philadelphia Mint.

From 1793 to 1857, the cent was a copper coin about the size of a half dollar. As rising copper prices made it impractical to keep striking them, in 1857 the Mint reduced the size of the cent, issuing a new design, the Flying Eagle cent. The new pieces were identical in diameter to modern cents, though somewhat thicker and made of copper-nickel. The design caused production difficulties, and the Mint soon looked to replace the coin. Mint Director James Ross Snowden selected the Indian Head design, and chose a laurel wreath for the reverse that was replaced in 1860 by an oak wreath with a shield. Cents were hoarded during the economic chaos of the American Civil War, when the metal nickel was in short supply. As Mint officials saw that privately issued bronze tokens were circulating, they induced Congress to pass the Coinage Act of 1864, authorizing a slimmer cent of bronze alloy.

In the postwar period, the cent became very popular and was struck in large numbers in most years. An exception was 1877, when a poor economy and little demand for cents created one of the rarest dates in the series. With the advent of coin-operated machines in the late 19th and early 20th centuries, even more cents were produced, reaching 100 million for the first time in 1907. In 1909, the Indian Head cent was replaced by the Lincoln cent, designed by Victor D. Brenner.

Production of the Indian Head cent for commerce began at the start of 1859. As issued for circulation, the pieces differ in some particulars from the pattern 1858 cent of similar design; Longacre sharpened some details. The pattern coin had the laurel leaves in the reverse wreath in bunches of five leaves; the issued 1859 cent has them in bunches of six. Cents dated 1858 with the adopted reverse (with six-leaf bunches) are known, were most likely struck in 1859, and are extremely rare.

In 1860, the reverse of the cent was changed to feature an oak wreath and a narrow shield; such reverses are also known on 1859-dated pieces struck as patterns. According to Richard Snow in his guide book to Flying Eagle and Indian Head cents, this was not due to problems with the "Laurel Wreath" reverse design used in 1859, as full details survive on many extant pieces.  Walter Breen, however, suggested that the feathers and curls on the obverse did not strike as well as they would later, and that "this may account for Snowden's decision to change the design again".  David Lange, in his history of the Mint, states that it was to give the coin, quoting Snowden, "more National character".  All 1859 cents and some from 1860 have the cutoff of Liberty's bust on the obverse end with a point; most 1860 cents and all later issues have it rounded.

Tens of millions of Flying Eagle cents had been issued in exchange for the old American coppers and small Spanish silver. The Spanish silver was still flowing into the Mint in early 1859 and, at Snowden's urging, Congress on March 3 of that year extended the redemption of these foreign coins, legal tender in the US until 1857, for another two years. Neil Carothers, in his work on small-denomination currency, challenged this decision as unnecessary—deprived of legal tender status, the remaining Spanish silver would have been eliminated through sales to banks for their bullion. Those who brought the old coins to the Mint received cents for them, at first Flying Eagle, and then Indian Head. In the year following the renewal, some forty million Indian Head cents were issued, meaning nearly a hundred million copper-nickel cents had entered commerce since 1857. As the coin did not circulate in the South and West due to prejudice against base-metal money, they choked commerce. No one had to take them; no law made them legal tender. At Snowden's urging Congress in June 1860 ended the exchange. Nevertheless, as Snowden admitted in his annual report that year, there were too many cents in circulation.  In October 1860, The Bankers' Magazine and Statistical Register reported that there were ten million cents in commerce in New York City above what was needed, and if anyone wished to order in bulk, they could be purchased at a discount.

Shortage and redesign (1862–1864)

The surplus of cents was relieved by the economic chaos engendered by the American Civil War, which began in 1861. At the end of that year, the banks stopped paying out gold, which thereafter commanded a premium over paper money. These greenbacks, beginning in the following year, were issued in large quantities by the federal government. Silver vanished from commerce in June 1862, as the price of that metal rose, leaving the cent the sole federal coin that had not entirely vanished from commerce through hoarding. The glut of cents had by then abated, as merchants had stored them away in quantity—one New York City floor collapsed beneath the load. There were other means of making change which passed in the emergency, from postage stamps to privately issued tokens, but the public demand was for the cent—the Philadelphia Mint struck record numbers, and set aside part of the production to be transmitted to other cities. Nevertheless, by July 1862, the cent, in quantity, could only be purchased at a premium of 4% in paper money in major cities in the East. The copper-nickel pieces were nicknamed "nickels", or "nicks". Presentation of coins in payment carried with it no obligation to make change in the same. Accordingly, with a small quantity of "nicks", a shopper could make purchases with exact change, without receiving such makeshifts as merchants' credit slips, that others might not accept at the stated value.

By 1863, The Bankers' Magazine reported that the premium for cents in Philadelphia had risen to 20%. Thereafter, the premium decreased as there was a flood of metal tokens issued by merchants, which were widely accepted. Other war expedients, such as fractional currency, lessened the demand for the cent by taking the place of missing silver coinage. Small quantities of cents circulated among them, though many were still hoarded.

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